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THE WEEKLY Link
CHRIS CATTO-SMITH
One aspect of importing is exactly like every other business the world over: Importers are in business to make money. But the nature of the importing business is such that it is extremely difficult to determine profit/loss. The documents required to support an import process are often complicated and prolific. It is daunting enough to imagine being able to manage these multiple pieces of paper (even images of them), without trying to imagine how you might bring together all the information those documents contain. But that's exactly what importers have to do.
- Timely and accurate: Logistics, the planning for, physical transport, and documentation of goods from a foreign vendor to importer/customer, is only one aspect of the supply chain. Logistics presents one of the greatest challenges because the entire process is beyond the importer's direct control. Logistics management can only be successful when timely and accurate information from the foreign vendor and transportation carriers is leveraged with an effective internal process.
- Avoiding missed opportunities: There is a lot of talk about emerging technologies to support the needs of importers. Even if these technologies were fully mature, and if companies were in a financial position to implement these kinds of solutions, it would be putting the cart before the horse for the vast majority of organisations. Most often, information is inaccurate (or arriving too late to be of use anyway), managed with a hodgepodge of spreadsheets, hard copies and emails; none of which can be easily cross referenced to each other. The result is overselling, missed opportunities, late delivery penalties, uncleared goods, inadequate customer service, wasted man-hours, and more. That all adds up to lost revenue.
- Sales and purchases: Once an importer receives a firm offer from an overseas supplier the next step in the process is the creation of sales orders and purchase orders. A sales order is sent to the importer's customer, confirming the order which has been quoted verbally. Sales orders are also used to acknowledge a customer's purchase order. Either way, the sales order is just one more link in what is becoming the foundation of the supply chain.
- Connecting information: Purchase orders are used to place an order for goods with a foreign vendor. In some cases, POs are issued to replenish goods that are being sold off from a warehouse. In others, the importer's PO is issued to fulfil a customer's specific PO. This is an example of a back-to back shipment. No matter the case, it is vitally important to be able to connect these documents in some way to allow for easy cross-reference.
- Documents, documents, documents: Quotes, offers, POs, SOs, bills of lading, letters of credit, certificates of analysis, invoices associated with the shipments (freight, etc.), container instruction sheets, FDA declarations, phyto-sanitary clearances, delivery orders, manifest, packing lists, certificates of origin, credit memos, air waybills, end use certificates, and many, many more documents are a necessary part of the importer's supply chain. Again, it is vitally important to be able to create a relationship between these pieces of paper and the information they contain.
Why?
The ability to cross-reference these documents in order to facilitate the clearance of goods is one reason. Another is that the puzzle presented by these documents must be unravelled if the importer is to have any hope of determining profit and loss.
- Dollars and sense: The term "landed cost" refers to the total cost of goods including things like: materials, freight, insurance, shipping, demurrage, duty, loading/unloading, inland freight, and any number of additional costs that need to be associated with an inbound shipment.
It's not difficult to appreciate the importance of understanding landed costs; without a true understanding of this number, it is impossible to set your selling price. Set your price too low and you are literally subsidising your customer's purchase.
- Understanding costs: Most importers use a standard accounting application, supplemented by spreadsheets, to track their inbound shipments, including monitoring the costs. At best, this hodgepodge produces an average landed cost. Although, some segments of the importing industry are not known for supplying high-quality goods, others, like food and chemical importers, are expected to do exactly that. In either case, an importer's exact understanding of costs is essential to long-term profitability.
- Look into the future: You don't need crystal balls to be a successful importer. However, you do need products and service from vendors and carriers who understand and fulfil their role in your success. You need a seamless system to connect all the links in your specific and unique supply chain. The technology is here, and the import industry experts to develop and implement the solution are here too. However, until recently bringing supply chain solutions to small and medium-sized importers, for whom this technology has been out of reach.
(Article source: VISCO white paper: The New Supply Chain)Weekly Link is co-ordinated by Barry Elliott (BElliott@OliverWight-AP.com) and Chris Catto-Smith CMC of the Institute of Management Consultants Thailand (cattoc@cmcthailand.org). It is intended to be an interactive forum for industry professionals; we welcome all input, questions, feedback and news
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